Photo by: STRF/STAR MAX/IPx 2021 3/18/21 Draftkings plans for $1 billion in convertible debt ... [+] offering. STAR MAX Photo: Draftkings posters photographed at the Hoboken train station in Hoboken, New Jersey.
Disney/ESPN, Caesars, Fox, DraftKings, FanDuel, State Governments and their Lotteries are all getting into this space.Since a Supreme Court decision in 2018 (Murphy v. NCAA) striking down a federal ban on sports betting, half of US states have legalized sports wagers.
No surprise that Nevada comes in as the leader in gambling revenue, followed by New Jersey, Pennsylvania and Illinois.All told there were $35 billion placed on US sports bets in 2020, generating $1 billion in revenue to sportsbooks, and those numbers are estimated to grow six fold in the next three years.
Given these facts, the ensuring battle over these dollars has become a land grab, including in New York and Connecticut where significant entry is about to come into the fold.The question becomes, what are the key competitive attributes that will determine who come to be the leaders in these markets.
Access to Consumers/ First Mover Advantage
Before sports betting on games themselves was legalized, online fantasy sports was the testing ground for decades, with DraftKings and FanDuel being the leaders.These companies amassed databases of a million plus individuals willing to place money on sports outcomes, and that likely contribute to the fact they are now also the leaders in the sports betting space with roughly 80% of the market.
DraftKings and FanDuel also have a head start in assessing consumer patterns in each state, including many regulations that are state specific.Both companies are funded by public companies, and have the resources to navigate an ever changing landscape.
League Endorsements
Sportsbook operators are competing to be named the official gaming partner of the various sports leagues. This official status not only legitimizes the company, but also provides distinct marketing and operating advantages. Official gaming partners acquire IP and data rights, granting them the ability to use the leagues logos, as well as its team trademarks and colors.
The NBA named FanDuel and DraftKings its official sports betting partners, while also signing a three-year, $25 million deal with MGM to make it the leagues exclusive official retail partner. Similarly, the MLB continued its investment in DraftKings, naming it a co-exclusive official sports betting partner along with BetMGM.
Even if not named an exclusive retail partner, others are competing to become one of several authorized sports betting partners with leagues; in August, PointsBet and WynnBET, along with BetMGM, were able to secure this designation with the NFL.
Partnerships
The battle to secure valuable partnerships extends well beyond the sports leagues themselves. Sportsbooks could gain a significant competitive advantage by striking a deal with any sports team or sports adjacent company.
For instance, sportsbooks have already struck deals with broadcast and cable networks, as CBS named William Hill its official sportsbook sponsor. Similarly, NBCUniversal owns a 5% stake in PointsBet, estimated at $500 million, while Fox Sports invested $236 million in its own branded sportsbook, FoxBet.
The utility of partnerships in the mad scramble may be best evidenced in New York, which will soon come into the sports gambling fold. Both Caesars and BetMGM have been named an official sports betting partner of Madison Square Garden, the New York Knicks and the New York Rangers, providing the companies with the opportunity to directly market to fans in-arena, via social media, and on broadcasts. Caesars has proven especially creative, securing a partnership with the Manning family including former New York Giants quarterback Eli Manning.
This trend also bodes well for powerhouse companies such as Disney and ESPN, who seek to enter into the sports gambling space. As Disneys CEO said, given our reach and scale, we have the potential to partner with third-parties in the sports gambling space in a very meaningful way. ESPN already partnered with Caesars to open a studio facility for sports gambling programming in Las Vegas; ESPN is also reportedly eyeing a $3 billion sports gambling partnership with Caesars and DraftKings.
Strategic partnerships have also proven useful in securing government approval in certain states. In New York, sportsbooks allied together into a consortium in order to present a more attractive bid for regulatory approval.
Further, to secure a license to operate in New York, the two winning consortiums partnered with the tribal nations that run casinos. Those tribal nations feared intrusion on their longstanding deal with the state, which granted them exclusive gambling rights in their region. The FanDuel-led consortium partnered with Seneca Nation, while the Caesars-led consortium partnered with the Oneidas and Saint Regis Mohawk Tribe.
Brand Perception / Marketing
As sportsbooks offer largely comparable products, marketing has emerged as a critical area of differentiation between competitors. There are no national advertising standards for sports gambling or federal agencies in charge of monitoring sports gambling, rather marketing regulations are left to the individual gaming commissions in each state. Thus, existing players have the advantage as they have the background and resources to navigate the patchwork of complex marketing regulations which vary from state to state.
While all operating under the same rules, Sportsbooks also will determine the type of brand image they will portray. If advertising is perceived as aggressive or even predatory, that will provide an interesting dynamic especially as new regulations are applied.
Wager Innovation
Every sportsbook offers bets on who will win a certain game, but not every sportsbook offers bets on whether a specific player will make their next two free throws. The Super Bowl best exemplifies how varied the offerings can be, as sportsbooks may offer bets on the length of the National Anthem, or whether the coin toss will be heads or tails.
Sportsbooks are trying to carve out their niche, exploiting the limited areas of differentiation as best they can. For instance, DraftKings has a betting carousel, displaying a series of bets the company finds most relevant based on your preferences. FanDuel offers easy navigation and frequent promotions.
Up and coming sportsbooks are faced with an uphill battle in the quest for differentiation, as start-up costs are steep and the ever escalating promotional arms race necessitates rising customer acquisition costs. Rising start-up Vigtory demonstrates the double edged sword of successful differentiation, as they have risen from the pack in the public consciousness by offering to take a substantially lower vig, or the cut the house takes on a bet. Yet critics have called this tactic a race to the bottom, as smaller companies will go broke trying to loss lead with small margins.
Regulatory Approval
Perhaps the most critical factor in achieving market success is securing government approval, and the terms one accepts to do so. This procedural hurdle is different in every state, and ill-prepared companies risk being completely shut out of a particular market. To gain approval, larger sportsbooks may need to make significant concessions, and smaller sportsbooks may need to highlight areas of differentiation just to get their foot in the door.
In Connecticut, sportsbooks must contend with the Connecticut Lottery Corp., which dominates the retail market. This quasi-public agency was authorized to operate as many as 15 retail sportsbook locations, largely because it was willing to agree to no-compete zones within 25 miles of a Mohegan or Mashantucket reservation. As this compromise started the process of negotiations with the Mohegans, Mashantuckets and Governor Ned Lamont, it was a comparatively small price to pay.
Rob Simmelkjaer, Chairman of the Board of the Directors of the Connecticut Lottery Corp., stated that underrepresented groups, including women-owned and minority-owned businesses, will have the advantage. While this may be a factor in Connecticut, at the very least, it likely varies state by state; critics of New Yorks approval system note that the process did not sufficiently account for whether operators promoted racial, ethnic and gender diversity.
BallyBet Sportsbook NY gained regulatory approval even though its apps first state launch was in only May 2021. This may be partially attributed to BallyBets unique social element, which allows bettors to follow their friends and generates a feed of their friends bets and betting statistics. BallyBet also stands out for its intuitive and easily digestible interface, allowing the company to nip at the heels of long standing leaders like MGM.
The approval process in some states, such as New Jersey, has been a relative free-for-all, where sportsbooks have had a far easier time gaining government sponsorship. There are nearly a dozen licensed operators in New Jersey, partnered with nearly two dozen online sites authorized to take bets.
New Jerseys comparatively laissez-faire attitude towards sports gambling demonstrates the interstate competition for gambling profits, as an estimated 20% of the sports betting action in New Jersey comes from New Yorkers crossing the state border. Time will tell if certain States regulatory schemes will have an impact on their neighbors.
So Who Wins?
At this point with the market still exploding, each company that earns its niche for a group of consumers should earn enough profit to claim victory.Once those players become well-entrenched over the coming years, a question will be whether the market can expand further or adapt to changing preferences.
In the end, in a market where the chief competitor is a bookie accepting unregulated bets (not subject to many of the factors above), the official entities who are able to capture the largest share of those previously undisclosed bets should come out ahead of the pack.Each of the above factors plays a role in that competition, and a leader should emerge that excels on each of those metrics.
See the rest here:
Place Your Bet: Who Will Win The Competition For Sports Betting Dollars - Forbes
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